By Roy Urrico
It is almost time to say goodbye to 2020, a year that challenged traditional banking models, stretched innovation to unprecedented levels, and made digital an undeniable priority. Heading into 2021 one fintech company believes credit unions need to leverage new technology partners and embedded financial services to help them regain their competitive footing.
The Atlanta-based Artis Technologies, which provides private-label consumer lending platforms, believes credit unions now face a challenge to further develop their relationships with merchants and members.
Chris Bracken, head of revenue at Artis Technologies, said credit unions, like many organizations, saw the expectation of digital services accelerate. Credit unions already equipped to handle interactions digitally, adapted rather quickly to pandemic mode. “Credit unions who were behind on their digital transition, most definitely felt the urgency more meaningfully to implement digital solutions.” Bracken emphasized merchants and consumers needed solutions from their credit unions that could help them weather the commerce storm.
However, financial institutions need to adapt to the disruption or outright changes to some traditional banking models. Bracken asked, “How do you leverage that innovation and transition to digital in order to enhance your business or consumer relationships? How do you use that to help your members?”
A Credit Union Opportunity
Artis believes credit unions can tap into a $4 trillion market opportunity by learning from business-to-consumer (or direct to consumer) fintechs, leveraging their tech expertise by becoming partners.
Bracken pointed to these critical areas:
· Fintech 3.0: This newest tech era began around 2009, when startups, conventional tech, e-commerce and social media firms started to deliver financial products and services directly to the e-commerce community. Now, points out Artis, Fintech 3.0 has matured. Credit unions can leverage artificial intelligence (AI), machine learning (ML) and highly integrated services to improve their digital experience. Bracken noted B2B and B2B2C is making a similar leap that B2C fintech made a decade ago. The new wave is about fintechs integrating AI, ML and other current services into banking to enhance credit union and bank brands. Credit unions that use open APIs can easily benefit from these innovations to deliver a better member experience and win back market share.
· Embedded financial services. Credit unions offering apps, websites and processes can automate and improve the member experience through embedded financial services. Some brands, such as Venmo, PayPal and many others, created way to tech-enable seamless financial experiences in their systems. Since then, customers have come to expect financial services availability at every opportunity. As businesses become more integrated with their customers, credit unions could empower services with embedded financial services like real-time loans at the point of sale.
· The trust (and subsequent rise) of AI. People have been hesitant to trust AI, especially when it comes to financial services. However, this technology has been around longer than people realize and is already part of people’s everyday life. AI can ensure the consumer receives more accessible credit and financing. Artis foresees a rise in AI adoption as financial institutions partner with fintechs to gain better results, save time, and build business. The commerce community and financial institutions will continue to differentiate AI models and usage, grappling to come to terms with the sheer volume of data available. Underwriters, for example, will have a difficult time in 2021 determining which models are good or bad. To this end, Bracken says it will take some practice.
· Credit decisions: Leveraging expansive alternative data, beyond traditional credit models, enables quicker, more accurate credit decisions. Alternative data sources may comprise public records, utilities, social media, spending habits, employment, fraud and risk. Artis suggests the pandemic should have taught financial institutions to work smarter, not harder. Bracken noted credit unions can deliver great value when they partner with—and leverage the expertise —of fintechs.
Delivering at the Point of Need
Artis delivers a way for credit unions to provide low-friction financing to business members at the point of need. Artis’ turnkey platform automates end-to-end lending without core processor integration and allows credit unions to embed themselves in the direct-to-consumer approach by making it more streamlined, more frictionless for the customer. The process leverages alternative data and ML/AI-informed decisioning for what it calls “a more accurate portrayal of creditworthiness.”
What can credit unions gain from a B2C fintech relationship? “Ultimately the path of least resistance wins,” Bracken said. He maintained personal loans offered through a B2C model are not that different from traditional loans offered by credit unions. “Do they have lower APRs or better terms? I think the answer is no, the real difference is the frictionless access to financial services.” He suggested if a credit union’s current loan process requires someone to drive to a physical location, then they have already lost their edge. “That’s not competitive when it comes down to what is the most frictionless way for me to access this financial service.”
How It Works
With Artis, the merchant invites the consumer to apply for a loan through a link sent to the consumer’s personal device. “In the time of COVID-19, it means less personal interaction. We’re able to keep socially distant,” Bracken explained.
After the customer fills out the loan application, Artis then automatically matches that consumer with credit offers from lending partners participating in its platform through Artis’ portfolio, Bracken detailed. “It’s all happening in real time. We manage that process through our systems and enable that transaction to occur. It really is as frictionless as possible through embedding finance into that transaction.” The merchant’s customer can transact business up to their approved credit limit. Bracken added, this is where Artis sees a lot of opportunity for credit unions.
Bracken noted. “We are more than a B2B2C model. We’re helping credit unions and merchants offer consumers access to credit exactly at the moment they need it.” He pointed out by embedding finance into that transaction, it allows a credit union, to embed itself in that transaction as a lender where they might not otherwise be directly involved.
Artis takes advantage of AI and ML in the decision process, but it does allow a real individual to actually make the final credit determination. “We believe that'’s critical. we are not letting the computer make the decision for you, but we are going to help allow it to inform us. (Computers) can crunch huge datasets, alternative datasets and allow us to make better decisions over time.” The decision process occurs in seconds, in real time.
Bracken said, “Credit unions should be looking for ways to participate in touch points they might not have previously participated in.” In addition, they can really look towards partnerships with fintechs in a more meaningful way. Otherwise, it is going to be challenging for the credit unions to compete in a more frictionless, lower cost environment. “That’s a huge opportunity for credit unions going forward. They can become embedded into those transactions and continue to offer their services where the consumer is really looking for that transaction to take place.”
Artis said it is looking for more credit unions to participate. “They want a consortium of lenders on the platform that cover the gamut of credit products and risk tolerances to match up with merchants on their platform. Artis works with both sides and provides the infrastructure behind the scenes, which allows the transaction to take place.